What does the SVOD (subscription video-on-demand) market have in common with the Autoroute du Soleil on a summer cross-country day? There’s a traffic jam. It probably didn’t escape your notice, but in the realm of legal streaming , the pretenders to the throne are legion. Disney, Apple, NBCUniversal, Warner, Amazon, Salto, Netflix… newcomers and old-timers alike are all pulling out all the stops for the best seats in the sun.
Symbols of this trend, Disney+ and Apple TV+, the platforms of the eponymous companies, will make the big leap in France and internationally by the beginning of 2020. This is not only a burden on an already highly competitive sector, but also takes it into a new dimension. That of an unprecedented explosion in supply and increased fragmentation of content.
This article is the first in a series on the impacts of the supply explosion in the SVOD sector. It provides an overview of the competition and analyses Netflix’s recipe for remaining the undisputed leader in the field. In the next section, we will discuss the potential impact of the arrival of Disney+ et al. on us as consumers.
How do you explain that group shot next year? First and foremost: the sector is at its peak. 455 million in 2018, according to the CNC, a turnover up 80% on the previous year. Don’t see any form of tricolour exception, the trend is widespread and video on demand therefore offers exciting prospects for those who will be able to offer a high value-added offer.
So inevitably, when one company starts out, it’s the snowball effect and the others line up to make sure they don’t miss the right car. However, it is not certain that the appetizing SVOD cake has enough slices for all of them. So some may have to make do with the crumbs.
The weight of SVOD (in purple) in the video-on-demand market. (source: CNC)
In Europe, the competition has been warned : Netflix already has more than 50% of the market and Amazon Prime Video is now its only real competitor. The king of SVOD is increasingly rooted in our homes and it will be difficult to dislodge him from the habits of his 5 million French customers. That doesn’t mean there isn’t room to settle. This may be a good time to try, especially given the current economic climate.
Of course, the billions invested each year by the Reed Hastings company to stay on top are equal to the success of some original productions, Stranger Things for example. However, the broadcasting rights for some flagship content will soon expire. As a result, these programs will return to their original owners, the declared competitors of Netflix. A (micro) crack in the ogre’s catalogue of the sector that these same rivals would be wrong not to exploit.
Gone are the days when Netflix could buy from the catalogue of other American entertainment giants with peace of mind. Their renewed interest in video-on-demand is closing doors for the industry leader. In addition to all the Disney productions (and thus those of Marvel, Star Wars, Pixar), the firm will soon have to part with a flock of films and series very popular with its subscribers.
For example, back to sender forFriends, The Office or the Harry Potter saga,because the outsiders want to make them the headliners of their respective platforms. Netflix is accustomed to the back and forth in its catalogue, 20% of which comes from outside, but the arrival of other contenders on its territory increases de facto departures and limits its room for manoeuvre.
But don’t think these mass repatriations will be enough to bring Netflix down. Even if Disney recovers all its creations to put them on Disney+ and promises other tempting exclusives, its catalogue will not exceed 10,000 items at launch. Peacock from NBCUniversal shouldn’t do any better and Apple TV+ promises even fewer programs to get their teeth into.
A modest amount of money compared to the 70,000 Netflix films and series. Newcomers will therefore have to work twice as hard to make up for this difference in size. Especially since the platform’s thought leaders have also anticipated developments in the sector for a long time.
Faced with the drying up of the Majors’ cold content vein, Netflix has found a solution: investing massively in original creations (8 billion euros in 2018, 15 in 2019 according to some sources). Not all of them are great, far from it, but they have the merit of existing and fill his catalogue. The firm can also boast several very good successes, Mindhunter, Stranger Things, Orange Is The New Black or 13 Reasons Whyin the lead. But the strategy of the SVOD platform goes even further. If eating local is fashionable, producing local is just as fashionable and Netflix knows it.
Netflix has been producing locally for some time now, in order to be able to customise its catalogue more and offer a product adapted to eachcountry, says Pascal Lechevallier, founder of theWHAT’S HOT MEDIAconsulting agency and a specialist in the sector. From this interesting positioning comes series such asElite(Spain), 3% (Brazil),Kingdom(Korea) or evenThe Crown(Great Britain) andFamily Business(France).
By internationalizing its productions, Netflix kills two birds with one stone: the firm increases its attractiveness to local subscribers, while making itself visible to the public authorities and the audiovisual industry in the target countries. All of this while continuing to enrich its catalogue with in-house novelties that reduce its dependence on other people’s content.
This is the latest and perhaps the best example in Canada. Netflix had made a commitment to the federal government to invest $500 million over five years in films and series shot in the country. It took him only two years to reach that amount and communicate with great fanfare on the subject. Reed Hastings has no shortage of ideas and the means to maintain its company’s leadership .
Disney+, Apple TV+ and others are planning to charge Netflix on the prices. Offered at less than 5 euros per month, the two platforms hope to make a difference in this area, if not elsewhere. HBO Max has gone the other way by announcing a $15 per month package. The Netflix subscription is available in three different packages at the same price:
- Essential at 7.99 euros per month
- Standard at 11.99 per month instead of 10.99 euros since June 2019 (most popular)
- Premium at 15.99 per month instead of 14.99 per month since June 2019
Assumed high-end pricing that will not change with the arrival of competing platforms. Netflix even raised its prices last June. For Pascal Lechevallier, the price war initiated by the new entrants shows a certain feverishness on their part:if they really thought they could be a credible alternative to Netflix from the outset, they would have aligned themselves with the leader’s prices instead of breakingrates. Their credo is a little different. It is a desire for rapid and immediate conquest, stresses the expert. The objective? Be aggressive to get as much market share as possible and use your weight to shake up the existing hierarchy.
Ranking of VOD and SVOD platforms in France before the arrival of new providers on the market(source: CNC)
Even if it means practicing a scorched earth policy? Maybe I am. At this price, the question of profitability will inevitably arise at some point, even if a platform like Disney+ relies primarily on the popularity of its content stock to get by. The fact remains that even if the services are operating at a loss, SVOD will remain just a drop in the ocean of other profitable activities for these multinationals.
So they can afford to try to be a pebble in the Netflix shoe for as long as they want. Not sure, however, what they can really afford to do, at least initially. Unless it is simply a matter of reducing Netflix’s hold on a market that was previously all but taken for granted. Careful, though. If Mickey’s firm decides to exploit all its licenses, while banking on synergies with its other services (Hulu, ESPN…), Disney+ could quickly catch up.